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Sharekhan keeps HOLD on Ranbaxy

Sharekhan keeps HOLD on Ranbaxy
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First Published: Mon, Jan 05 2009. 09 09 AM IST

Updated: Mon, Jan 05 2009. 09 09 AM IST
Ranbaxy Laboratories (Ranbaxy) has lost about half a month’s exclusivity period due to a delay in the probable launch of Sumatriptan Succinate, a low-cost version of GlaxoSmithKine-owned Imitrex, as the company is still awaiting the approval of the US Food and Drug Administration (USFDA).
Ranbaxy was planning to launch the drug in December 2008 as the product loses its patent expiration in June 2009.
The company holds a first-to-file (FTF) status and a 180-day exclusivity after the settlement of the patent litigation with GlaxoSmithKine (Innovator) in January 2008.
The delay in the launch of the product could lead to severe price erosion and lower market share for Ranbaxy.
Also, Dr Reddys Laboratories and Par Pharmacueticals have already launched the generic version of Imitrex in November 2008, while Cobalt Pharmaceuticals is expected to launch the product around January 2009.
Even if Ranbaxy manages a delayed launch, these three companies will have consolidated their market shares by then and Ranbaxy will have failed to cash in on the Imitrex opportunity.
We had estimated $4 million of revenues from Imitrex in CY2008 and over $54.2 billion of revenues in CY2009.
We expected potential earnings of $29 million from the 180-day exclusivity period of Imitrex. However, we believe there could be risk to our estimates now.
Outlook
Although the reasons for the delay are not known, yet the street has already anticipated a delay in the launch of the product citing the risks associated with the business.
While we expect the USFDA’s concerns with regard to Ranbaxy’s manufacturing operations to affect the sales of its US business, the one-off exclusivities will add to the cash flows in the future.
We believe that Ranbaxy’s diversified business model should be supported with gains from the FTF opportunities going forward.
However, the continued uncertainty over the extent of likely damage to the US business and the timing of the resolution of USFDA issues will continue to cast a shadow on Ranbaxy’s prospects in the near term. Given the continuing uncertainties related to the business, we reiterate our HOLD recommendation on the stock.
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First Published: Mon, Jan 05 2009. 09 09 AM IST
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